Based on the inequities perceived by each group, what sorts of conflicts do you expect to see at the restaurant? Are these conflicts likely to increase or decrease over time? What are the likely long-term costs to the restaurant’s profitability if management does not address the perceived inequities?Explain

Introducing the Case of Katie O’Donnell: Motivating Staff at the Waterfront Grill

The Waterfront Grill is a restaurant owned by manager Kamal Williams and located in Ithaca, in upstate New York. The restaurant is among the first in the state to cater to the craze for bubble tea (a Taiwanese milk- or fruit-based tea with tapioca) that has swept the country. Boasting a dedicated bubble tea bar staffed with bubble tea experts, the Waterfront Grill is a unique restaurant in town.

Katie O’Donnell has been a server at the restaurant for the past two years, working three evening shifts during the week and full days on weekends. Server turnover has been high at the Waterfront Grill. Katie, one of the most experienced servers, has just accepted the job of assistant manager. She sees her promotion as an opportunity to identify and solve a number of problems she has experienced at the restaurant during the past two years.
Katie is frustrated by the lack of motivation and the conflicts among the staff in the restaurant, many of whom are students like herself. There are major divisions among the hostesses, servers, food runners, bar staff, and cooks regarding monetary rewards. She hopes her new position as assistant manager will give her the authority to address some of the issues.

Katie is only two weeks in to her role as assistant manager when she faces her first major challenge. One of the servers, Diego, takes her aside after a late shift and tells her he is thinking about quitting. Katie is frustrated. Turnover is a huge problem at the Waterfront Grill, and she knows that staff is expensive to replace because of advertising and training costs. Diego is a hard-working server and has been at the restaurant full time for almost a year. Katie hopes she can find some way to persuade him to stay. Because it’s near closing time and the restaurant is almost empty, Katie sits down with Diego in a corner booth to discuss the situation.

“Diego, you’re one of the best servers on staff; we don’t want to lose you,” Katie begins.
“Look Katie, I’m just not getting enough tips anymore,” Diego says. “It’s not worth working this hard for so little compensation.”
Katie is puzzled. The servers’ base pay is the lowest in the restaurant, but the tips servers earn usually ensure them high overall compensation. She asks Diego why he is unhappy with his tips.

“A couple of the servers, Kim and Lucia, have agreed to share their tips with the hostesses if they give them the best tables and keep their sections filled before anyone else’s. They boast about how much they make, and it’s just not fair. My section isn’t being seated as quickly, and my tables aren’t turning over as quickly as Kim and Lucia’s, so I’m collecting fewer tips.”
“Is that the reason you want to quit?”

“Partly, but that’s not all of it. The Waterfront Grill is not a fun place to work—most of the staff has a bad attitude. One of the runners, Evan, approached me the other day and asked me if I’d share my tips with him. I asked him, ‘Why would I do that? It’s not my fault runners don’t get tips.’ Since then he’s been bussing my tables in my section slowly and not very well, because he knows if my tables aren’t ready, the hostesses will seat customers in another section instead.”

Katie can relate to everything Diego is saying, and she agrees that many of the employees have an indifferent attitude that could certainly have a negative impact on the customers. In addition, she is aware of the rift among the servers, the runners, and the hostesses. It’s clear that the hostesses and food runners are envious of the servers’ tips.
Although she wasn’t aware of it when she was a server, she isn’t surprised that some of the other servers have struck an arrangement with the hostesses.

Katie believes the compensation structure in the restaurant is partly to blame for the conflict and jealousy between the staff. After listening to Diego’s complaints, Katie is ready to empathize with him but quickly realizes Diego isn’t finished yet.
“And don’t get me started on the kitchen staff. They get upset when the restaurant is full because they have to work harder for no extra pay, and then they take it out on us because we make more tips on a busy night. When they screw up a food order, which happens a lot, or they take too long getting the food ready, the customers complain, and guess whose tip is affected yet again? That’s right—mine!” Diego crosses his arms angrily.

“You’ve told me about what’s going on with the other servers, the hostesses, the kitchen staff. . . . What about the bubble tea bar staff?” Katie asks.
Diego leans forward. “The bubble tea bar staff has always been a pretty decent group, but they’re miserable these days because the bar has become quieter over the last few months—they aren’t getting good tips either. In fact, the other day, one of the bar staff, Yuan, was telling me he’s looking for a new job.”

Katie knew many of the staff were dissatisfied but had hoped her new position would give her a chance to change things before people started quitting. Yuan is the most efficient in the group, yet she can’t blame him for looking for a new job. Despite the initial craze for bubble tea, bar bills have fallen by 20 percent over the past six months. Because bubble tea sells for $7 a serving, this decline has affected not just the bar staff’s tips but the overall profitability of the business.

Diego interrupts her train of thought and says, “Look, Katie, the bottom line is I don’t like the way things are being run around here. Management should be paying us fairly and making sure there are no unfair practices going on between the staff members.”
Katie nods and replies, “Diego, have you spoken to Kamal about these issues? I think that as manager and owner of the Waterfront Grill, he would really like to know what’s going on.”

Diego shakes his head, “I liked Kamal when he hired me, but he has barely looked my way since I started. I decided to talk to you since I know you, and Kamal has promoted you. You’re getting a business degree so you must have some thoughts about how to fix this mess.”
Katie promises to make an appointment with Kamal to discuss the challenges facing the restaurant. But first she needs to persuade Diego not to leave the restaurant. After more discussion, he agrees to stay on for another six weeks on the provision that Katie will initiate changes that improve the working conditions in the restaurant.

As soon as Diego leaves, Katie writes down notes about their conversation in preparation for her meeting with Kamal. She needs to work out some solutions to the problems Diego outlined before the rest of the workforce threatens to quit.
In this narrative, one of the main reasons Diego wants to quit his job is that he doesn’t feel he is being treated fairly. The concept of equity theory, introduced by psychologist J. Stacey Adams, holds that motivation is based on our perception of how fairly we are being treated in comparison with others.[i] According to this theory, our perception of what is fair depends on the ratio O/I where O equals outcomes like the recognition, pay, and status we enjoy and I equals inputs like our effort, experience, and ability.

Diego believes he is underrewarded because the restaurant hostesses are giving two other servers preferential treatment, and he is making less tips as a result. People adopt several behaviors in the face of such perceived inequity. Let’s explore how Diego and the restaurant staff have responded to the perceived inequity at the Waterfront Grill:

Change inputs

People may increase or decrease their inputs depending on the situation. For example, because Diego perceives that others are getting more tips than he is through unfair means, he has decided it isn’t worth continuing to work hard and he feels unmotivated and is considering quitting to find a different job.

Attempt to change outcomes

Employees might try to change the outcomes to restore O/I balance. For example, Katie decides to approach her manager to work out a solution to the problems highlighted by Diego.

Carry out cognitive reevaluation

Workers may change their perspective on the other person. If Diego spoke with the servers who were sharing tips with hostesses and discovered that their tips had not increased despite their arrangement, he would likely be less dissatisfied (at least initially) with his own tips.

Attempt to get to change inputs or outcomes

Employees might try and convince others to reduce or give up other outcomes. For example, one of the runners asks Diego for a cut of Diego’s tips, which will reduce Diego’s outcomes but increase his own. Alternatively, the kitchen staff might try to similarly force servers to provide them with a cut of their tips in order to provide timely, accurate food orders.

Pick another “Other”

Employees might compare themselves to different coworkers to perceive a more equitable situation. For example, if Diego stopped comparing himself to the other servers in the restaurant and instead compared his tips to the bubble tea bar staff, he might become more satisfied with the tips he was earning as a result.

Leave the field

When employees feel strongly enough about the inequity, they will quit their jobs. As Katie recognizes, organizational turnover can cost a company significant amounts of money. Diego is on the verge of quitting because he feels a high level of inequity at the Waterfront Grill.
Equity theory includes the concept of organizational justice, which focuses on what people perceive as fairness in workplace practices.[ii] There are two main kinds of organizational justice: distributive and procedural.

Distributive justice is the degree to which people perceive outcomes to be fairly allocated. For example, employees doing the same job as others expect to be compensated equally. When equal work does not produce equal outcomes, or when one employee is paid more or less than another for doing the same job, then there is a lack of distributive justice.

In the Waterfront Grill scenario, Diego is unhappy that two servers have worked out an unofficial arrangement with the hostesses that reduces his income and is upset that his refusal to share tips with Evan, a runner, is further reducing his income since Evan is purposefully working less hard to bus Diego’s tables. Diego perceives a lack of distributive justice and believes the restaurant’s management should provide a solution to these issues.

Procedural justice is the degree to which people perceive the implementation of company policies and procedures to be fair. For example, most restaurants have a strict policy regarding tardiness and absenteeism. Those who are repeatedly late for work or who miss work without covering their shift will eventually lose their jobs. If such a policy applies to all staff at every level, then employees will be more likely to accept it as fair. If some workers are exempt, then employees are unlikely to believe they are being treated equally.[iii]

In our narrative, Diego is upset by the ways that employees are undermining the compensation plan distributed by the Waterfront Grill, as well as the lack of managerial oversight by the owner and manager, Kamal.

In the following section of the narrative, we continue to follow Katie’s experiences as assistant manager as she attempts to develop solutions to the problems at the Waterfront Grill.

The more Katie thinks about the difficulties at the Waterfront Grill, the more she believes the staff should be given goals to achieve. She thinks this will increase motivation and encourage employees to work as a team. That evening, she spends a couple of hours thinking about what realistic goals for the staff would look like.

Katie believes the employees at the Waterfront Grill might be more satisfied and encouraged to work as a team if they were given a pay increase, but revenue is down because of declining bubble tea sales, and the restaurant can’t afford to pay higher wages right now. Katie concludes she needs to find a way for the staff to earn more tips and to generate additional income for the restaurant at the same time. If the servers and bubble tea staff are all trained to promote and sell additional items at the Waterfront Grill, she reasons, everyone will benefit, and if servers receive a percentage of all restaurant checks that include bubble tea, they’ll be motivated to sell more. She also believes that if she sets goals for the servers and bar staff to sell a certain amount of drinks per shift, they will become more motivated and energized. To effectively set goals for the restaurant staff, Katie considers several characteristics of goals.

Katie devises specific goals for the servers to sell 50 cups of bubble tea per shift.
Katie realizes the servers may feel apprehensive about trying to sell such a large number of bubble tea orders in the space of a shift, but she believes the challenge will motivate them into achieving the goal.

As soon as Katie gets the go-ahead from Kamal, she is going to have a chat with the servers to ensure their acceptance and commitment to the goal.
Katie plans to develop a spreadsheet to record the amount of bubble tea sales per individual server per shift so she can monitor the progress of each member of the staff and provide feedback after every shift.

Finally, Katie reviews the concept that goals are often arranged in hierarchies in order to assess which ones take priority.[iv]
From her experience as a server, Katie knows that setting goals too far into the future can be demotivating for employees. Katie is satisfied that the behavioral goals she has set will motivate the servers to increase their income and help reach the long-term goals of achieving overall profit for the restaurant.

Katie spends the rest of the evening drafting an e-mail about her proposal to change the tipping structure at the restaurant.
When Katie knocks on Kamal’s office door the following morning, she is nervous but enthusiastic. This is her first initiative as assistant manager, and she hopes Kamal agrees to give her ideas a try.

Kamal greets Katie and invites her to sit down. She shares her discussion with Diego and what she has learned about the different problems among staff that exist in the restaurant. She finishes by proposing that the servers be trained to increase bubble tea sales and receive a percentage of the additional sales. Kamal listens carefully and then sits back in his chair.

“Katie, part of the reason I appointed you as assistant manager is that I need someone on the floor the staff can relate to. They don’t always come to me with their problems, and I’m not always available to hear them, so I’m glad Diego feels he can confide in you.”
Katie smiles. “This is a good start,” she thinks.

Kamal continues, “I think your goal-setting strategy to increase bubble tea revenue sales makes sense. I’m going to give it a trial run. Let’s set a goal to increase bubble tea sales by 15 percent using the methods you have proposed to me. I’m giving you six weeks to achieve that goal.”
Katie is delighted. Kamal has given her an opportunity to try out her goal-setting technique with the servers, and she can’t wait to get started. But then she realizes she has been focusing only on the servers.

“What about the rest of the staff?” she asks. “From what I have been told, it’s not just the servers who are unhappy with their pay. The kitchen staff, the runners, the hostesses, the bubble tea bar staff . . . everyone is disappointed with their pay.”
“If revenue increases, then I’m happy to address the pay issues experienced by the rest of the staff. But at the moment, profits are down, and I can’t afford to increase everyone’s base pay right now,” Kamal replies.

Katie understands—she needs to make her plan work if things are going to change.
That afternoon she gathers the four servers—Kim, Theo, Diego, and Lucia—in the staff room to present the new goals. Kim and Lucia, college students who have been working at the Waterfront Grill part time for the past six months, are efficient workers but aren’t connecting with their customers. They are the servers who struck a deal with the hostesses to share their tips provided the hostesses gave them preferential treatment. Katie believes that setting a team goal the servers must achieve will discourage this practice since having the hostesses treat any one server preferentially is likely to cut down on the number of tables seated during a shift. Theo, also a college student, is Katie’s replacement; he has been at the restaurant for only two weeks and is still learning the ropes.

In preparation for the meeting, Katie spent some time researching Vroom’s Expectancy theory, which holds that people will choose certain behaviors over others with the expectation of a certain outcome.[v] The theory describes motivation as a function of an individual’s beliefs concerning effort-to-performance relationships (expectancy), work–outcome relationships (instrumentality), and the desirability of various work outcomes (valence).

Expectancy is the probability that the amount of work effort invested by an individual will result in a high level of performance. In other words, it could be phrased as “What’s the probability that, if I work very hard, I’ll be able to do a good job?” It is measured in a range from zero to +1. If someone believes strong effort will not result in a higher performance level, his or her expectancy is zero; however, if the person believes a good effort will lead to high performance, expectancy is +1. For example, for Katie’s plan to succeed, the servers need to expect that their hard work will result in an increase in bubble tea sales.

Instrumentality is the probability that good performance will lead to various work outcomes. Another way of saying this is “What’s the probability that, if I do a good job, that there will be some kind of outcome in it for me?” It can range from −1 to +1. An instrumentality of +1 would apply to people who believe that their performance would make an outcome likely, whereas people who think their performance will not result in outcomes would have an instrumentality of −1. For example, Katie needs to reassure the servers that meeting their bubble tea sales targets will result in their receiving a percentage of sales for each ticket.

Valence is the value individuals place on work outcomes. Phrased a different way, “Is the outcome I get of any value to me?” Valences range from −1 to +1 and are positive or negative depending on the nature of the outcome. For example, Katie hopes the servers will value the opportunity to make more money and see the advantages of working closely as a team.

During the meeting, Katie does her best to convince the servers that their increased efforts will lead to higher performance and outcomes that will eventually result in rewards. She also makes the point that this initiative is not just about making more money but also about everyone pulling together to make the restaurant a success. When she is finished, Diego is the first to speak.

“I think trying to sell 50 bubble teas per shift is going to be difficult, but I think it can be done,” he says. The other servers murmur in agreement.
“What if we don’t meet the target?” Theo asks. “I’m new here, and I’m not too sure if I’ll be able to increase my sales when I’m just learning the menu and how to do the job.”

“Theo, you’ve picked up things really quickly,” Katie says, “and I have no doubt you’ll meet the goals. If you feel you’re struggling in any way, you can talk to me any time. In fact, I’ll be providing each of you with feedback after every shift for the next six weeks, so you’ll have an opportunity to discuss any concerns you have. I’ll be there for you every step of the way.”

Theo thanks her and tells her he will do his best. Then Kim speaks up.
“Say we reach our sales targets and meet our quotas, which I do think is achievable. We make more money for the restaurant, and we each receive an additional percentage of those sales on top of the tips we already earn.” Katie nods and gestures for her to continue. “The bubble tea bar staff take 30 percent of our tips for tables that purchase bubble tea. So where is the incentive for us to sell more bubble tea when most of the tip goes to the bubble tea bar?”

Lucia joins in. “Kim’s right. There’s no point in us working like crazy when we won’t see much of a reward!”
Katie feels the color drain from her face. She is at a loss for words. In her zeal to apply goal setting for the servers she has completely forgotten about the 30 percent tip-out to the bubble tea bar staff. Of course the servers have no incentive to strive for this goal because they don’t think they will get the rewards. In expectancy theory terms, the link between effort and performance is strong—the servers believe if they put the effort in they can reach the bubble tea goal—but the link between performance and reward is weak. The servers don’t believe they will get the rewards; in fact, adding two bubble tea drinks to a ticket will actually reduce the servers’ total tip because of the 30 percent tip-out to the bartenders. Katie is mortified at her oversight—it’s even more embarrassing because she has spent two years as a server herself—she should know how the tips are distributed!

She gathers herself and addresses the group. “Team, I’ve made a mistake. Kim and Lucia, you’re both absolutely right. I’m going to have to revise my plan. Before I do this, would any of you like to contribute your own ideas regarding a new, more achievable goal?”
The servers are silent, and Katie promises them a solution by the end of the week.

In this chapter, we have explored the different concepts and theories associated with motivation. Motivating employees can be complex and depends on a number of factors such as knowing what drives employees to achieve goals. In the next chapter, we further analyze the application of these motivational theories and how they affect employees.

Group Task: Thinking Critically About the Case of Katie O’Donnell
Equity and Employee Motivation at Waterfront Grill

Put yourself in Katie O’Donnell’s position as the new assistant manager at Waterfront Grill, and consider the five critical-thinking steps in relation to workplace equity and motivation.
OBSERVE

What inequities does each group of workers (servers, hostesses, runners, kitchen staff, bubble tea bar staff) perceive at Waterfront Grill? To what extent are the perceptions of each group accurate or inaccurate in your opinion? Does the accuracy of each group’s perception matter from a managerial standpoint? Why, or why not?

INTERPRET
Based on the inequities perceived by each group, what sorts of conflicts do you expect to see at the restaurant? Are these conflicts likely to increase or decrease over time? What are the likely long-term costs to the restaurant’s profitability if management does not address the perceived inequities?
ANALYZE

Katie decides to set a quota on bubble tea sales to address staff problems. Assuming her initial proposal was workable, what problems among what group or groups of staff would her proposal solve? What problems among what group or groups of staff would her proposal fail to solve?

EVALUATE

Evaluate the effectiveness of Katie’s decision to solve the problems at her restaurant by setting staff goals. Assuming that Katie can change her goal-setting proposal to account for the tip percentage that goes to the bubble tea bar staff, how successful do you believe her effort will be in reducing perceived inequities among all groups of staff?

EXPLAIN

If you were Katie, what steps would you take to solve the perceptions of inequity and dissatisfaction at Waterfront Grill?

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